44% of flipped single-family home purchases were by private investors in 2023

Private equity firms have been carving out an increasingly substantial share of single-family home purchases, raising concern about the potential consequences for housing affordability and market competitiveness.

Recent data reveals that in the third quarter of 2023, these financial entities accounted for 44% of purchases of flipped single-family houses, Medium reports, citing a Business Insider study. The surge in activity marks a significant departure from traditional real estate dynamics and ushers in a new era of institutional investment. 

The practice has not only raised eyebrows but also fears, as the growing footprint of private equity raises critical questions about its role in raising real estate prices and potentially sidelining individual homebuyers. 

A narrative is emerging that squarely places the blame for the astronomical rental and housing prices, especially in 2020-21, on “institutional investors” — a category that includes private equity firms and hedge funds. Critics argue that their competitive edge in acquisitions could be fueling the affordability crisis.

Amid the housing predicament, some see the expansion of private equity as opportunistic. The National Multifamily Housing Council, a group representing landlord interests, has analyzed census data and presented findings that 38% of multifamily unit owners in 2021 were individuals, while investors snapped up 24% of single-family homes in the same time frame.

Historically, investment firms and financial institutions had their sights set on multifamily properties such as apartments, leaving single-family homes largely to individual buyers. The aftermath of the 2009 recession, however, witnessed a turning tide, as low property prices and correspondingly low interest rates created a ripe environment for these investors to expand their portfolios into what was once considered nontraditional territory.

Over the subsequent decade, the percentage of all single-family homes being bought by investors grew incrementally, from 10% to 15% annually. This data, compiled by CoreLogic and reported by Pew Trust, underscores the significant shift taking place in private homeownership. 

Correction: A previous version of this report incorrectly reported the nature of private equity firms’ involvement in the purchases of single-family houses. They were purchasers of 44% of flipped homes, according to the Business Insider study.